Thanks for everyone's help. I hope I haven't sounded whiny as that wasn't my intent. I know that I am in a wonderful financial position, so I am not really freaking out about it either. Just trying to gather data to make some decisions. Again, thanks to everyone who contributed.
Just glancing through. But in your income needs did you factor in social security?
Nope. Not counting on govt for anything. Will be a nice bonus if I get SS.
When does your pension kick in? You say you plan to retire in 7-10 years which would make you 53-56yrs old. Would you receive a pension from then or would there be a gap? Does your pension have a vesting schedule or penalty for retiring before normal retirement age?
If you aren't planning for SS and are in good health you should consider delaying SS until 70 in order to increase the value of of payments.
I think we can create a income needs gap between retirement and inflows and then decide what rate of return is required from your settlement. To discuss asset allocations before you really understand how much income you require is putting the cart before the horse.
I have done lots of hypothetical calculations and figure I would like to have around $50-55K per year for expenses. If I get pension of $36K per year in 7 years, which is what I estimate, then I need an additional $14-20K per year. I have been planning for $20K. No matter what happens, as long as pension doesn't go broke, I figure I will find a way to live on just that if necessary.
Vested in pension. 7% comes out of my check each month and they pay 7% on my contributions. Since I am vested, I will get 200% match. I cannot take out a lump sum, but get a benefit for life. If I stay 7 more years I am eligible to receive monthly payments for life if I retire at that point. I'll be 53. If I quit before then, I will get a monthly benefit at 60 for the rest of my life of approximately $24K per year, if I were to quit today. If I decide to work longer, my benefit goes up.
I probably will delay SS until 70, unless I can get paid on my ex husband's benefit when he starts withdrawing without effecting my own SS. I am a bit confused about those rules. If possible, I also don't want to take out of IRA until RMD kicks in. (Edit: unless it is more tax advantageous for me to use IRA before then)
My suggestion is to take a defensive position to your wealth. Based upon (limited) information of your situation it looks like you are in pretty decent financial shape and as such your primary goal should be to ensure you have sufficient inflow to make up that pension gap.
You also stated a desire to drive more optimized income from your assets. I would suggest that you consider that a switch you flip at 70, and until then take the absolute least amount of risk with current windfall payment.
Based upon your desire to not rely upon SS you need to model an investment plan that will provide you with income stream of $20K (to be conservative) from the age of 53 all the way through to say, 95?
There are two ways to approach that income stream, you could acquire an asset that kicked off $20K without touching your principle, this would require a higher risk profile than the second route, which is to eat into your principle.
My suggested defensive route would be to seek to build an asset allocation that was very low risk, even to the point where you were eating some principle, but will still get you to 95 years of age. The reason I like this route is that while you don't want to rely on it, it is likely that SS will kick in and take most of that burden away from you. As such the worse thing you could do is invest in something overly aggressive and in the interim lose principle from market downside.
Here is a useful mathematical calculation to run:
Calculate Net Present Value of Assets that will produce $20,000 of income over 42 years:
At 1% Interest (starting at age 53) you would need a nest egg of $683,162.16 at age 53
At 2% Interest (starting at age 53) you would need a nest egg of $564,695.87 at age 53
As you can see, you don't need a lot of risk at all with the amount of your current lumpsum. However, you need to be mindful of the impact of inflation, so the real numbers you should be looking at would be 1%+Inflation 2%+Inflation. You would be wise to peg inflation higher, perhaps at 4.5% in order to see how solid your plan is. In which case, the number you need is somewhat higher than above. If you consider how achieving such a return is very conservative and consider that you have 7 years of interest and capital additions to make, you could easily get there.
Is your pension COLA/Inflation adjusted?
** Your 100K in a single stock in an IRA with 92K gain. Sell it. There would be no capital gain transaction, once sold, use the 100K for a more appropriate risk balanced investment. You could just buy the market, or a low cost ETF that included that stock plus a bunch of others to spread out your risk.
Based upon the numbers that I see, you do not need to get involved in real estate leasing in order to achieve your goals- you can build a very stable bond/stock mix that will keep you going all the way to 95 without even touching SS.
So to quickly recap:
I would suggest between now and 53 adding to your savings until you get it to a level where it can simply survive inflation.
Delay SS til 70
If SS is around at 70 rebalance your asset allocations for the bit 'you don't need now' and put that into something a little more aggressive.
If SS isn't around at 70, you are good all the way through to 95 based on your model.
Problems:
Health and Long Term Care costs: these may throw your plan out of kilter, you may wish to explore LTC insurance.
My approach to investing is that you should take the absolute minimum amount of risk to achieve your goals, and since you are already very well positioned I would make every effort to not expose your wealth to downside. I would also posit that there is a good chance that we will go through another economic cycle within the next 7 years, so holding a good part of wealth outside of the market may be smarter for you, especially as you don't actually need the upside.